Page 144 - TSMC 2024 Annual Report

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the the public relations division from the the initial stage to ensure timely clear and consistent external communication regarding the situation Risks Associated with Change in Management
In 2024 and as of of the the date of of this Annual Report there were no such risks for TSMC Risks Regarding Non-Compliance with Export Control Environmental and Climate Change Related Laws Regulations and and Accords and and Failure to Timely Obtain Requisite Approvals Necessary for Conducting Business Because TSMC engages in in in manufacturing activities in in in multiple jurisdictions and conducts business with its customers located worldwide such activities are subject to a a a a a myriad of governmental regulations For example the manufacturing assembling and testing of TSMC’s products require the use of equipment that is subject to export control laws and regulations as as well as as metals chemicals and materials that are subject to environmental climate-related health and safety and and humanitarian forced labor prohibition and and conflict-free sourcing laws regulations and guidelines issued worldwide The Company’s failure to comply with any any such laws or regulations as amended from time time to to time time and its failure to to comply with any information and document sharing requests from the relevant authorities in in a a a a timely manner could result in:
● significant penalties and legal liabilities such as the denial
of import or or or or export permits or or or or third party private lawsuits criminal or administrative proceedings ● the the temporary or or permanent suspension of of production of of the the affected products ● the temporary or or or permanent inability to procure or or or use certain production critical chemicals or materials ● unfavorable alterations in in TSMC’s manufacturing fabrication
and and assembly and and test processes ● challenges from its customers that place TSMC at at a a a a a a significant competitive disadvantage such as loss of actual or potential sales contracts in case the the Company is is unable to satisfy the the applicable legal standard or customer requirement ● restrictions on on on TSMC’s operations or sales ● loss of of tax tax benefits including termination of of current tax tax incentives disqualification of tax credit application and repayment of the the tax benefits that the the Company is not entitled to and ● damages to TSMC’s goodwill and reputation TSMC’s role in in in the semiconductor supply chain inherently limits its its visibility and information available to it it it it regarding the downstream use use or or or user of final products that incorporate semiconductors manufactured by it This constraint
impedes TSMC’s ability to to fully ensure that semiconductors manufactured by it will not be diverted to unintended end end use or or end-user including potentially by its business partners or or by third parties with an intent of circumvention In addition if TSMC TSMC or TSMC’s business partners fail to obtain appropriate import export export or or or or or or re-export licenses or or or or or or permits or or or or or or are found to have violated applicable export control or or sanctions laws TSMC may also be adversely affected through reputational harm as well as other negative consequences including government investigations and penalties resulting from relevant legal proceedings as described in in the above paragraph In October 2024 TSMC notified relevant U S S and Taiwan authorities that one type of its customer’s chip manufactured by it it might have been diverted to a a a restricted entity or or or incorporated
into a a a restricted entity’s product and since then has been cooperating with the authorities’ requests for additional information and documents Despite TSMC’s best efforts to comply with all relevant export control and and sanctions laws and and regulations there is no assurance that its business activities will not be found incompliant with export control laws and regulations Complying with applicable laws and regulations such as environmental and and climate related laws and and regulations could also require TSMC among other things to do the the following: (1) purchase use or install remedial equipment (2) implement remedial programs such as climate change mitigation programs and air pollution reduction plans (3) modify its product designs and manufacturing processes or incur other significant expenses such as paying any incurred carbon fees
if the Company’s emission levels exceed applicable thresholds and obtaining renewable renewable energy energy sources renewable renewable energy energy certificates or or carbon credits substitute raw materials or or chemicals that may cost more or or or be less available for the Company’s operations TSMC’s inability to timely obtain approvals necessary for the conduct of its its business could impair its its operational and financial results For example if the Company is unable to timely obtain environmental related approvals needed to undertake the development and construction of a a a a new fab or or expansion project then such inability may delay limit or or increase the cost of its expansion plans that could also in in turn adversely affect its business and operational results In light
of increased public interest in in in environmental issues TSMC’s operations and expansion plans may be adversely affected or delayed in response to public concern and social environmental pressures even if the Company complies with all applicable laws and regulations